Mandated Benefits for your Puppies and Kittens? Maybe in California.

See our authors’ additional “family members” below, Bacardi, Charles, Robert and Tux (from top to bottom).

According to a survey conducted by the American Pet Products Association, in 2019 approximately 70% of American households include a pet,¹ a number that we will likely see increase this year as a result of COVID-19.² It seems inevitable that this rise in pet adoption will result in an increase in consumer spending on these additional “family members.” With the pet industry already at nearly $70B in consumer spending,³ $1.56B of which is spent on pet insurance premiums, it is no wonder regulatory agencies are taking a second look at consumer protections such products afford.⁴ Notably, the National Association of Insurance Commissioners (“NAIC”) had its sights set on revamping pet insurance protections pre-COVID 19, and is currently working on its Pet Insurance Model Act. It should not be surprising to the pet insurance industry that the NAIC is not the only one taking a second look at the consumer, and pet, protections in place.

Last week, the California Department of Insurance sponsored California State Assembly Member Sydney Kamlager in introducing Assembly Bill 553 (the “Bill”)⁵ to expand the protections granted by California’s current pet insurance statutes. Noting an increase in pet ownership as well as the existing concern of animal overpopulation and stray animals, which has only been exacerbated by COVID-19, this Bill both amends and adds additional protections for consumers and pets alike.

If passed, the Bill would require pet insurance to fully cover the cost of spaying and neutering cats and dogs and would add pet insurance cancellation protections for policyholders. This is a fairly remarkable change for coverage that, although sometimes referred to as pet “health insurance,” is a classic property and casualty product. It feels like a furry step towards acknowledging the nuances specific to pet insurance. Under the Bill, any insurance policies issued, amended, or renewed on or after January 1, 2022 must provide full coverage for spaying and neutering as well as coverage for expenses associated with such surgeries. The Bill also stipulates that an insurer cannot accept or require additional payment for sterilization services; that is, the insurer cannot charge copayments, coinsurance, deductibles, or other forms of cost sharing for such services. Additionally, under the Bill an insurer cannot require a policyholder to purchase an additional benefit to obtain coverage for sterilization services. (The California Department stated that many pet insurance policies currently require the purchase of a wellness plan for such services to be covered.⁶)

Importantly, if passed, the Bill would also require insurers to deliver a notice of cancellation for any pet insurance policy at least 20 calendar days before the effective date of cancellation. However, pursuant to the Bill, if the policy cancellation is due to nonpayment of premiums or fraud, the notice of cancellation must be delivered at least 10 calendar days before the effective date of cancellation. This requirement is likewise applicable to any pet insurance policy issued, amended, or renewed on or after January 1, 2022.

The Bill is set to be heard by committee on March 13, 2021. We will continue monitor the Bill as well as NAIC activity in this space.

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¹ AJ Horch, Most Americans own a pet, but not the insurance 1 in 3 faithful companions will need, CNBC (June 20, 2019, 9:25AM), https://www.cnbc.com/2019/06/20/most-americans-own-a-pet-but-cant-afford-to-pay-their-medical-bills.html.

² Megan Mccluscky, Rescue Animals Are TIME’s 2020 Pet of the Year, Time (Dec. 9, 2020, 11:00AM), https://time.com/5912616/pet-of-the-year-2020-rescue-animals/.

³ American Veterinary Medical Association, Spending on pets approaches $70 billion (Apr. 11, 2018), https://www.avma.org/javma-news/2018-05-01/spending-pets-approaches-70-billion.

⁴ Horch; North American Pet Health Insurance Association, North American Pet Health Insurance Market Surpassed $1.71B (USD) in 2019 (May 26, 2020), https://naphia.org/news/naphia-news/north-american-pet-health-insurance-market-surpassed-1-71b-usd-in-2019/.

⁵ The full text of California Assembly Bill 553 (2021) may be viewed here: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220AB553&firstNav=tracking.

⁶ Press Release, California Department of Insurance, Commissioner Lara and Assembly Member Kamlager team up to address overpopulation and health care of ‘pandemic pets’ (Feb. 11, 2021), http://www.insurance.ca.gov/0400-news/0100-press-releases/2021/release017-2021.cfm.